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To what extent has reunification eroded the most important features of the German model of industrial relations?

Essay 2000 7 Seiten

BWL - Wirtschaftspolitik


Table of Content

1. Introduction

2. The German model of industrial relations

3. Industrial relations in East Germany after the reunification
3.1. collective bargaining
3.2. co-determination
3.3. conclusions

4. Problems and challenges of the system in the reunited Germany..

5. Conclusions


1. Introduction

In this essay, I present the main features of the former German model of industrial relations first followed by an analysis of the problems of East Germany adopting it. I point out the main problems of the whole system nowadays in the united Germany and analyse to what extent they are influenced or even caused by the reunification after that.

2. The German model of industrial relations

The German model of industrial relations has become a famous one because of its success over the last 50 years. There are two main pillars, which characterise the German model, the collective bargaining and the co-determination. Being responsible of the name of the “dual system”, these two layers are clearly divided, its relationship is a complementary one with the result of creating a “simple division of labour between the bargaining over agreements by the trade unions and the implementation of agreements by the works councils.”1

There are two parts participating in the collective bargaining, an employer at least, but more likely employers associations on the one hand, and the trade unions on the other. They are the only parts, who got the right by law to negotiate agreements in this case.

Co-determination exists in two institutional forms, board level representation and works councils. But, as “legislation … for works councils … has had a far greater impact on German IR than the three versions of supervisory board participation [board-level representation]”2, and this is likely the same for the problems of adopting it in East Germany, I concentrate my analysis on the case of works councils.

The system of collective bargaining combined with the co-determination at plant level is a highly regulated system of industrial relations, which was created in an atmosphere of post-war consensus between the main representatives of capital and labour. It is characterised by a high degree of centralisation (collective bargaining) and co-operative and professional behaviour of the two competing factors leading to a very successful period over the post-war decades in times of economic growth and distributing welfare gains in Germany. That explains why it is often seen as an ideal model of industrial relations until the 1980`s in Europe. Since the 1980`s, the German model is facing different threats, which I describe in chapter 4.

3. Industrial relations in East Germany after the reunification

Although there was a relatively fast decision for monetary and economical unification in June 1990, which was followed by the formal reunification in October 1990, there was a big controversy of how the “new” eastern part of Germany should look like. Caused by fears of a massive migration of eastern workers and low-wage region in East Germany, which would have been a major threat to the high-wage qualityproduction industry in the western part of Germany, there was a consensus to fulfill even a “social unification”. An equalisation of living standards and wage level-parity should have followed as soon as possible.

Despite of the fact, that the people of East Germany had not gained any experience with a system of industrial relations like the “old” German one, the decision to adopt this system was made promptly in May 1990 with introducing the main laws of German industrial relations (Works Constitutions Act & Collective Agreement Act) in the East. I analyse the most important problems of this institutional transfer in the following part of my essay.

3.1 collective bargaining

Because of the fact, that the trade unions of the former GDR had strong links with the state and its negative reputation, there was the decision to dissolve them and to transfer their members to the western trade unions. That caused a huge increase in membership numbers of the western unions. The main union confederation DGB (Deutscher Gewerkschaftsbund) had an increase of 46 % in its membership numbers from 1990 to 1991, leading to a total amount of 11.564.923 members in 1991.3

The introduction of employers associations, the other part of collective bargaining was much harder to realise, because the status of an independent employer was a complete novelty in the economy of East Germany.

After this initial boost in membership numbers for the trade unions, there was a steady decline over the last years and several other problems threatened the system of collective bargaining. It followed the collapse of the eastern economy, causing a loss of nearly 4 million jobs during one year, which of course highlighted existing problems of institutional transfer and caused problems itself.

A further problem was the structure of the eastern economy, which was dominated by smaller firms. The average plant size of the eastern states was only “between 50 % and 70 % of the average plant size in the western part.”4 Thus, combined with the economical disaster and the decision for wage equalisation, the settlements, which included negotiations like wages of 70-80 % of the western pay-level and wage parity in 2-3 years in some sectors, were much to generous for the eastern economy to implement them at plant-level in such difficult times.

In the summer of 1992, Gesamtmetall decided to revise their agreement, introducing changes like the aim of a delayed wage equalisation and “escape clauses”. This was followed by the complete abrogating of the deal in February 1993. As this was not acceptable for the trade unions, they succeeded in organising a general strike in April 1993 with about 100.000 participating employees, which was an enormous effort with the background that eastern workers have not been used to fight for their rights for a long time.

However, they negotiated wage equalisation again, but this time delayed until 1996 and introduced “hardship clauses”, which allowed firms in difficult economical circumstances to pay less than the negotiated wages in the centralised agreements. This was often seen as an ambiguous deal. It was of course a great success of the unions to re-establish the agreement of 1991, but the delay of wage equalisation was a signal for retreat from this aim and the introduction of the “hardship clauses” created an atmosphere of the East as a “laboratory for the flexibilisation of collective bargaining”5.

Thus, according to Hyman, “the idea of “free collective bargaining” was problematic from the start in East Germany, and has become increasingly so in the five years since unification.”6

3.2 co-determination

Directly after the introduction of the Works Constitution Act in 1990, there was an expectation, that the eastern councillors should be familiar with this complex system of co-determination over night. This was especially difficult in these times of economical disaster.


1 Hassel, A. (1999) “Institutional Relations in Eastern Germany”, British Journal of Industrial Relations 37:3, page 487

2 Baethge & Wolf in Locke et al. (1995) “Employment Relations in a changing World Economy”, MIT Press, page 232

3 Lane, C. (1995) “Is Germany following the British Path? A Comparative analysis of stability and change.” Industrial Relations Journal 25:3, table 7

4 Rudolph, W. & Wassermann, W. (1996) “Betriebsraete im Wandel: Aktuelle Entwicklungsprobleme gewerkschaftlicher Betriebspolitik im Spiegel der Betriebsratswahlen.” Muenster, Verlag Westfaelisches Damfboot, page 160

5 Hyman, R. (1996) “Institutional Transfer: Industrial Relations in Eastern Germany.” Work, Employment & Society 10:4, page 613

6 Hyman, R. (1996) “Institutional Transfer: Industrial Relations in Eastern Germany.” Work, Employment & Society 10:4, page 614


ISBN (eBook)
496 KB
Institution / Hochschule
University of Warwick – Warwick Business School
1,7 (A-)
German Industrial Relations Europe



Titel: To what extent has reunification eroded the most important features of the German model of industrial relations?